Motivated Seller Gold Mine – Targeting Niches for a Higher R.O.I.

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[retweet]Over the last few blog posts (Direct Mail, Part 1 & Direct Mail, Part 2), I have been lauding the benefits of direct mail marketing, and discussing the strategies wherewith savvy real estate investors are able to generate a steady stream of motivated seller leads. While direct mail should never be the only tool in your marketing belt, it is certainly a formidable one that should be an integral part of any effective motivated seller marketing plan.

While many investors use a shot gun approach, and target specific areaswith their direct mail marketing, perhaps the most effective strategy is to target a specific type of SELLER with a specific type of DISTRESS. Not only does this typically improve your advertising dollar ROI (return on investment), but it helps to ensure that the phone calls you receive will fit within your specific investment objectives.

In the next few posts, I will go through some of the specific niches that are available in the world of motivated seller marketing, most of which can be found free of charge on your local county’s clerk of courts website. A few of the strategies may involve paying a lead service or data harvesting company for the leads, but most of those services are extremely affordable and cost-effective when used as part of a larger marketing campaign.

Niche #1 – Probate Properties: Probate properties are homes that have been inherited by someone, typically a friend or relative of the deceased owner. Most people don’t NEED a 2nd home, and so oftentimes the inherited property can be more of a burden than a blessing. The new owner is now responsible for upkeep and lawn maintenance, property taxes, insurance, as well as securing the property from potential theft or vandalism. These additional expenses can be budget-busters for the home’s heir, and so oftentimes they become a MOTIVATED seller.

Due to the sensitive nature of the situation, those who pursue probate properties need to be a little more understanding and compassionate than they would normally need to be with another type of motivated seller. However, if you can be a sympathetic ear to someone in the grieving process, and you have the patience to wait through the potential legal bog, as well as the possibility of multiple squabbling heirs…then this could be an EXTREMELY profitable niche for you.

The exit strategy on most probate properties is going to be either rehab or wholesale. Many of the homes will be dated and in need of numerous cosmetic and mechanical updates, and so they will unlikely be “turn-key.” These are typically great properties to renovate and sell to a retail buyer, or wholesale to a rehabber for a quick assignment fee. On a rare occasion, you will come across an overleveraged probate property that will require a short sale before any other investment strategy can be pursued.

Niche #2 – Code Violations: Code violation properties are homes in which the owner has violated a county ordinance or building code, and so they have been issued a warning or had a lien attached to the property. Code violations can be given out by your local county enforcement officers for numerous reasons, some of which include a broken window, an unsafe structure on the property, or an overgrown lawn.

Sellers who have had a LIEN placed against the property because of their code violation are typically very motivated. If they had the money to remedy the violation, they would have most likely taken care of it long before it got to the lien stage, because the penalties for non-compliance are typically very hefty…sometimes $500 or more PER DAY. However, while this niche market is typically very motivated and responds to letters at a higher-than-normal-rate, you also never know what you’re going to find when you look at the property. Many of the homes will be “tear-downs” or vacant lots (homes that the county already tore down) and so some of the leads won’t be able to be converted.

The most common exit strategies will be similar to probate properties, because these will commonly be homes in very poor condition with little to no mortgage balance. So, once again, code violation properties will generate a large amount of potential deals for renovation or wholesaling to other rehabbers in your area. You might also want to connect with some small local builders in the area, or Habitat for Humanity, who might be interested in purchasing some discounted lots from you for new construction.

Be sure and stay tuned for our future posts, where I will be addressing a few more of the targeted niches in the motivated seller market. Until then, are there any niches you’ve had success with in the past? Have you tried probate or code enforcement lien properties? If so, what were your results? Let us know by commenting below!

6 Comments

In my area their are many distressed homes. That have violations etc. I know a lot of rehab buyers that fix the houses and sell them. I want to do direct mailing in my area. Just a small area. There are tons of absentee home owners. I been searching my county and city websites and even called… I need some advice in getting a list of the properties with violations and tracking down the home owners… Any advice?

Allison, unfortunately I can’t give you much guidance for your area. In our area, the code violation liens are public record and easily search online. I would call your county recording office, and ask them first. Otherwise, you could check out one of the many online list services, that can provide you with lists of absentee owners. Our local county will provide a CD with all the names and addresses for $19. Each county is different, but most of them have a way for you to get the information fairly easily.